In a recent “precedential” opinion, the Third Circuit, applying New Jersey law, approved an employer’s use of an additional, extra-stringent restrictive covenant for its high-performing salespeople, subject to careful blue lining by the court to ensure that the covenant does not create an unreasonable burden for the employees. ADP, LLC, the well-known provider of payroll and other human resources services, required its new sales employees, as a condition of employment, to sign a Sales Representative Agreement and a Non-Disclosure Agreement. Together, the two agreements essentially prohibited the employee, for one year after the termination of employment, from soliciting ADP customers “with which the Employee was involved or exposed” while employed at ADP. Once employed, ADP’s sales staff could earn stock awards by meeting certain sales targets. But to receive an award, the employee had to sign a third agreement, a Restrictive Covenant Agreement, which imposed still more post-employment restrictions on the employee. Among other things, the Restrictive Covenant Agreement essentially prohibited the employee for two years after termination from soliciting all current and prospective ADP customers, whether or not the employee was “involved or exposed” to the customer while employed by ADP. The Restrictive Covenant Agreement also contained a geographic restriction, which essentially prohibited the employee from competing against ADP in the same geographic area...
Tagged: Trade Secret
Effective October 1, 2015, employers in the State of Connecticut are restricted from requiring or requesting employees and job applicants to provide access to “personal online accounts,” which include email, social media and retail-based Internet web sites used exclusively for personal reasons. Specifically, the new law (Public Act No. 15-6) (“the Act”), prohibits employers from requesting or requiring employees or job applicants to: provide the username and password, password, or other means of authentication to access an individual’s personal online account; authenticate or access a personal online account for the employer to view; or invite an employer to accept an invitation or be compelled to accept an invitation from an employer to join a group related to a personal online account.
NLRB Judge Strikes Down Employee Handbook Confidentiality Policy — Including Protection of Customer and Vendor Data
An employee handbook containing policies prohibiting (1) the disclosure of confidential company information, including personnel data, (2) use of the employer’s logo or trademark except as authorized by the company and (3) obstruction and interference with government investigations, including a requirement to notify the company’s human resources representatives or law department and to obtain approval to release information for a government investigation was found to violate Section 8(a)(1) of the National Labor Relations Act (“NLRA”) by an NLRB Administrative Law Judge (“ALJ”) in Macy’s Inc., JD(NY)-21-15. According to the ALJ’s decision, Macy’s employees when reading the policies could reasonably construe such policies to restrict their rights under Section 7 of the NLRA to engage in protected concerted activity for their mutual aid or protection.
The Obama Administration recently released a report outlining a new strategy to combat the theft of U.S. trade secrets, by ramping up business, diplomatic, law enforcement and legislative efforts to protect this vital category of intellectual property. The “Administration Strategy on Mitigating the Theft of U.S. Trade Secrets” included inputs from the Departments of Commerce, Defense, Homeland Security, Justice, State, Treasury, the Office of the Director of National Intelligence and the Office of the United States Trade Representative.
Is your company’s hard earned, valuable confidential data at risk? Are you taking all the steps you should to safeguard this information? In a recent global report by Symantec, 50% of employees who lost or left their jobs in the past 12 months indicated they kept confidential company data. Of these, 40% indicated they planned to use the proprietary information in their new jobs. Exacerbating the situation is the perception on the part of employees that it is acceptable to take confidential corporate information, and that their companies do not care.
New Jersey Court Finds Violation of Computer Related Offenses Act and Other Unlawful Conduct, Ordering Disgorgement of Profits, Attorneys’ Fees and Punitive Damages
In B&H Securities, Inc. v. Duane Pinkey et al., the New Jersey Superior Court found that former employees taking computer files from – and using the files to unfairly compete with – their employer violated the Computer Related Offenses Act, N.J.S.A. 2A:38A-1 et seq. (“CROA”), and breached other common law and contractual obligations. The Court awarded actual damages, based on plaintiff B&H’s lost profits of $737,087.00, as well as punitive damages of $100,000 and attorneys’ fees under the CROA.
The federal government continues to take aim at those who violate trade secrets rights. On December 28, 2012, the Theft of Trade Secrets Clarification Act of 2012 (S. 3642) became law, expanding the definition of trade secrets under the Economic Espionage Act (EEA). In addition, as previously reported in a Gibbons IP Law Alert blog, the President is expected to sign legislation recently passed by Congress that triples the damages for a violation of trade secrets protection laws and provides technical changes to patent applications and protections. Also worthy of note is an 82-page report from the U.S. Department of Justice issued last month detailing federal enforcement efforts concerning trade secrets theft.
New Jersey Superior Court Finds the Recently-Enacted New Jersey Trade Secrets Act Does Not Preempt Common Law Claims
In an opinion dated December 7, 2012, a New Jersey Superior Court judge in Bergen County considered an issue of first impression relating to the recently-enacted New Jersey Trade Secrets Act (“NJTSA”). In SCS Healthcare Marketing LLC v. Allergan USA Inc. et al., defendant Allergan sought to dismiss numerous common law claims brought by plaintiff SCS, arguing that SCS’s statutory claim for misappropriation of trade secrets under the NJTSA preempted its common law claims. SCS filed suit alleging that Allergan misappropriated marketing contractors’ trade secrets relating to a proprietary technology portal. Specifically, SCS alleges that Allergan revealed its proprietary and confidential information to a rival health care marketing company, thereby violating state laws relating to unfair competition, disclosure and trade secrets.
This past spring, we reported the Second Circuit’s reversal in U.S. v. Aleynikov, where the Court considered violations of the Economic Espionage Act of 1996 (“EEA”), 18 U.S.C. § 1832, and the National Stolen Property Act (“NSPA”), 18 U.S.C. § 2314. In short, the Second Circuit ruled that the EEA pertains to trade secrets “placed in” commerce, and that Aleynikov’s alleged misappropriation of the source code of Goldman Sachs & Co.’s trading system, which was for internal use, therefore was not violative of the EEA or the NSPA.
Just as trade secrets cases continue to proliferate in the news, the U.S. Senate introduced legislation last week aimed at streamlining the ability of American companies to combat trade secret theft. Under the proposed legislation S.3389, “Protecting American Trade Secrets and Innovation Act of 2012″(“PATSIA”), a single federal statute would be created under which companies could sue in Federal Court, as an alternative to the existing structure of state or common law statutes. To be eligible, plaintiffs are required under a heightened pleading standard to: “(A) describe with specificity the reasonable measures taken to protect the secrecy of the alleged trade secrets in dispute; and (B) include a sworn representation by the party asserting the claim that the dispute involves either substantial need for nationwide service of process or misappropriation of trade secrets from the United States to another country.” Plaintiffs also are subject to a three-year statute of limitations.